Why Iron Condor Vega Can Change After an Earnings Move

Summary

The document asks why an iron condor’s displayed vega can conflict with an implied-volatility-versus-profit chart, and why the position’s vega changed sign after a large stock move. The response emphasizes that option Greeks are model-dependent and can shift as spot price, implied volatility, and time to expiration change. A short-dated position around earnings can therefore have materially different sensitivities after the event.

The question supplies too little information to diagnose the specific discrepancy: the pricing dates, spot prices, implied volatilities, details of the chart, and the pricing model are unclear. The response also points out that an iron condor contains four options, so a chart or aggregate Greek must account for every leg. It recommends scenario analysis before using a short-dated earnings structure. The discussion offers a caution about interpreting Greeks, rather than a worked explanation or verified account of the particular trade.

Key ideas

• An option position’s Greeks can change as spot, implied volatility, and time to expiry change.
• Short-dated options around earnings warrant scenario analysis because event moves can alter sensitivities sharply.
• An iron condor’s aggregate vega reflects all four option legs.
• A specific Greek discrepancy cannot be diagnosed without pricing inputs, chart details, and the model used.

Tags

# Iron condor with positive vega


# Iron condor with positive vega












I am backtesting this Iron Condor before earnings.

In the position summary Vega (Mid Quote) is -3.04\$ but in the chart below (IV vs Profit $) it's clearly shown that a decrease in volatility will not provide any profits.

The next day (after a -12% stock move) Vega turned positive. How is that possible?

## Answer by Ezy (score 2)

https://quant.stackexchange.com/a/43454

Just to be clear: please provide the 2 dates you are pricing your package at and the values of the spot and IV on each of those pricings.

Also you are pricing very short dated options immediately before earnings and there was very sharpe move (unsurprisingly). So it seems pretty clear that your greeks will move!

It is obvious you need to perform some earnings scenario analysis before putting up short date structure like this.

Also greeks are model dependent and those are american options do you know anything about your pricer ?

Eventually it is unclear the meaning of your “IV vs profit” plot. There are 4 options involved here.

All in all it seems you are providing very partial information so conditional on what you gave, everything is possible

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.